�This merger (Bank of America and
Merrill Lynch) is a classic example of how the actions of our nation�s largest
financial institutions led to the near-collapse of our financial system,� said
Attorney General Cuomo. �Bank of America, through its top management, engaged
in a concerted effort to deceive shareholders and American taxpayers at large.
This was an arrogant scheme hatched by the bank�s top executives who believed
they could play by their own set of rules. In the end, they committed an
enormous fraud and American taxpayers ended up paying billions for Bank of
America�s misdeeds.� --New York State
Attorney General Andrew Cuomo
Andrew Cuomo�s complaint filed in the New York Supreme
Court, County of New York, against the Bank of America and two former top
executives has the potential to push that too big to fail entity off the
edge of a very steep cliff. The charges of massive fraud are based on a
compelling and exhaustive
filing on February 4.
A trial will likely involve testimony by the current Bank of
America CEO and President Brian Moynihan
against defendants Kenneth Lewis,
the bank�s former CEO and board chairman, former chief financial officer (CFO) Joseph L.
Price, and the bank itself. Price is currently in charge of BofA�s credit
The complaint charges fraud before, during and after the
bank�s merger with struggling brokerage firm Merrill Lynch in late 2008. The
fraud cost bank shareholders and citizens billions of dollars. This is the
first major case brought against our nation�s largest financial
institutions. These are the same financial institutions and executives that
nearly destroyed the economy.
Cuomo�s press release states clearly that Lewis and the bank
are examples of a much larger problem. It appears to be a leading indicator of
future actions by the New York attorney general. Why else would Cuomo have
generalized about institutions (plural) in his statement about this particular
If Cuomo succeeds in taking down one of the toughest guys on
the block, he�ll make a point to the rest of the crew: you�re next, get ready
to cooperate. Many of the key perpetrators are located in Cuomo�s jurisdiction,
although Bank of America (BofA) is headquartered in Charlotte, North Carolina.
Clearly, there are others in line for some New York style law and order.
Cuomo is joined in this action by Niel Barofsky, Special
Inspector General for the federal government�s Troubled Asset Relief Program
(TARP). TARP provides the billions in bailouts to bogus bankers and
corporations. There�s a credit line of $23.7 trillion
should it be needed for even more bailouts. Ever wonder why you can�t get a
loan? They�ve taken all the money.
Charges and remedies
The bank and the two named executives are charged with
failing to inform the bank�s board of directors and shareholders of the major
red ink on Merrill Lynch�s books prior to the merger. CEO Lewis, CFO Price, and
other BofA officers and professionals chose to hide $16 billion of Merrill
Lynch known pre tax losses prior to board approval. That�s fraud, plain and
filed by New York Attorney General, Feb 4, 2009
The complaint also charges that the same parties with strong
arming the federal government for $20 billion to cover Merrill�s debt by
threatening to back out of the merger if the money wasn�t forthcoming. Then
Secretary of the Treasury Henry Paulson and Fed Chairman Ben Bernanke had
encouraged BofA to acquire Merrill, apparently without a rider that BofA would
get billions in the process to cover their fraudulent business practices.
The lawsuit seeks two overriding remedies. The two named
defendants and the entire Bank of America are enjoined from �any conduct,
conspiracy, contract, or agreement, and from adopting or following any
practice, plan, program, scheme, artifice or device similar to, or having a
purpose and effect similar to, the conduct complained of above.�
In addition, the defendants and the bank are to �disgorge
all gains, pay all penalties and pay all restitution and damages caused,
directly or indirectly, by the fraudulent and deceptive acts complained of
These and the other remedies promise a degree of justice
and, quite frankly retribution for the mess caused by the defendants. An unnamed
and unintended remedy could be serious damage to the good will value of
the Bank of America. The spectacle of a conviction of the bank and a former CEO
and current division head for fraud would have a devastating effect on public
confidence. Too big to fail may be a notion upended once and for all by
a guilty verdict.
Witness Lineup � It�s Bank of America versus Bank of
Andrew Caffrey and Todd Wallach of the Boston
Globe, hinted that Bank of America President and CEO Brian T. Moynihan will
be a key witness for the prosecution. The Globe article notes that the current
BofA chief, �who was involved in negotiations (for the Merrill acquisition) as
the bank�s general counsel, was not charged.� Later in the same article, they
quote Cuomo as saying, Moynihan, �has been candid with our office with respect
to the roles he played after becoming general counsel.�
Put simply, Moynihan was central to the merger, knew about
the fraud, participated in it, but didn�t blow the whistle. All of that is
established in Cuomo�s complaint. He cooperated with Cuomo and wasn�t indicted.
His name will be at the top of the attorney general�s witness list, no doubt.
As if that�s not bad enough for the bank, defendant Joseph
L. Price, former CFO, is currently heading up Bank of America�s credit card
Should Moynihan testify, we�ll see BofA�s current CEO
helping Cuomo convict his predecessor of fraud. Moynihan�s testimony will also
argue for a conviction of his current head of credit card operations. Since
Bank of America is charged, we�ll also see its current CEO plus the �Relevant
Parties� described in the complaint testifying that the corporation was also guilty
of fraud. Many of the 35 Relevant Parties named are current or former BofA
executives or board members.
Other key witnesses may include Federal Reserve Chairman Ben
Barnanke and former Treasury Secretary and TARP architect Henry Paulson, They
encouraged the Bank of America � Merrill Lynch merger as part of their efforts
to prevent an alleged financial meltdown at the end of the Bush administration.
Charlie Gasparino of the Daily
Beast reports that the defense counsel, former U.S. Attorney Mary
Jo White, wants the case dismissed. If not, Gasparino says that �one person
close to the defense� claims that White will call Paulson and Bernanke to
testify. Cuomo has the facts and obviously believes Paulson and Bernanke on the
sequence of events leading to these charges. Absent a �Perry Mason� moment by the
defense, their testimony holds no surprises or benefits for the defendants.
Mary Jo White has little or nothing at this point other than bluster.
Justice for the people?
It�s been 10 years since Congress and President Clinton freed
Wall Street and the major banks to open a big casino on Wall Street. That
resulted in ruinous schemes like the real estate bubble. It�s been five years
Greenspan told citizens to get an adjustable rate mortgage, cash out the
equity in their homes, and jump into the stock market. It�s been over a year
since Wall Street and the big banks nearly ruined the economy, cost citizens
jobs, savings, retirements, and countless other hard-earned gains through a
variety of no-win schemes sold as solid investments.
Nothing of any importance has been done to regulate the
financial industry since the bailouts. Prior to the Cuomo-Barofsky charges,
there have been no major cases brought against the perpetrators of our current
Hopefully, New York Attorney General Andrew Cuomo started
what will become an era of accountability for those at the very top.
This should be about more than just one case. It�s an example of top down
May the bank, Mr. Lewis, and Mr. Price have the speediest of
trials and the absolute maximum penalties should they be found guilty.
They knew exactly what they were doing every step of the
This article may be reproduced in full or part
with attribution of authorship and a link to this article.